Petrol and diesel prices have been raised through an increase in excise duty. But indications are that the prices of petro products will be raised further within a month or so. The five per cent import duty on petroleum crude is back. The fiscal deficit continues to be a cause of concern. The year-old economic growth stimulus, introduced towards the end of 2008 to fight the global as well as local depression, is substantially dumped by restoring indirect taxes and levies on several items, including petroleum crude. There are no crutches for the corporate sector to walk faster, this time.

For the first time, the Union Budget recognises that India's corporate sector has attained adulthood and can grow on its own strength. The government can make minor adjustments in taxes and levies to meet its social sector obligations without a large fiscal deficit. This is a very positive message from the government to industry. The question is: how far is the corporate sector capable of living up to the government's expectation in the face of growing imports of finished products, further import liberalisation, dumping of foreign products, continuing high levels of excise duty and other levies, high capital cost, fear of further price escalation of petro products, rising inflation, growing trade deficit and inadequate fiscal support to the export sector? The indirect taxes, mainly from excise duty and service tax, are projected to raise an additional revenue of as much as Rs. 46,000 crore. They may not affect the industrial production and sales, but they are bound to fuel inflation, which is already high. The prices of basic industrial raw materials and construction materials such as coal, steel, power and cement will go up. This will affect both the manufacturing as well as the infrastructure sector.

If the Indian stock market reacted positively to the budget announcement, it is mainly because of further liberalisation in the government's foreign direct investment (FDI) policy. Foreign institutional investors (FIIs), which control the Indian stock market, are naturally bullish. The high level of FDI inflow, which exceeded $20 billion in the first nine months of the year, is bound to strengthen the sentiments of the foreign indirect investors as well. Permission to open new private banks and non-banking financial companies and fiscal concession to realty and hotel industry have further improved the market sentiment. The fertilizer industry is happy as it will be allowed to raise prices of basic nutrients. In the post-budget trading, Nifty went up by 100 points and Sensex by 350 points.

In fact, the government's decision to postpone implementation of the proposed direct tax code and the new goods and service tax (GST) norm by a year cannot be regarded as encouraging to the corporate sector. Central excise duty on all non-petro products has been raised from eight to 10 per cent to put the industry back to the 2008-09 position. The logic behind the move may be that a higher disposal income with a large section of the public is unlikely affect the overall demand for industrial products. But, what is bound to affect the corporate sector is the proposed increase in the basic prices of petro-products. Union Finance Minister Pranab Mukherjee has cleverly left the unpleasant task to his Cabinet colleague, Murli Deora, the Petroleum Minister. (IPA Service)